Why Disney Will Move the Dow Tomorrow

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

The Dow Jones Industrials is having another volatile day, quickly dropping to a loss of 100 points in the first hour of trading before recovering every bit of that lost ground by 12:15 p.m. EST to trade up a single point. Amid the poor performance of the Dow and the U.S. stock market on the whole so far in 2014, Disney is preparing to release its earnings report for the holiday quarter. What the multimedia entertainment empire says about the state of its industry could well determine whether the Dow can recover from its year-to-date losses or will continue to struggle.

Disney will release its earnings report after the market closes this afternoon, with investors expecting to see results at 4:15 p.m. EST. The company will follow up the release with a conference call scheduled to begin at 5 p.m. EST.

Source: Disney.

Investors will look closely at the Disney earnings report to see whether it continues to justify the big gains the stock saw in 2013. For a long time, Disney has taken advantage of positive conditions in nearly all of its businesses, and that has shown up in profit growth and a big jump in share prices since the recession of 2008. Increasing optimism has come from strategic acquisitions that have only broadened the already wide appeal of Disney's rich content library.

But the real value of Disney's report is the wide-ranging picture it gives of several different parts of the economy, both within the U.S. and globally. Theme park and resort attendance figures offer a snapshot of conditions in the travel sector, measuring the willingness of visitors to travel to destination sites for unique entertainment experiences. Results from the company's ESPN and ABC networks paint a picture of advertising revenue from television, as well as the willingness of cable providers to pay up for content. The filmed entertainment division shines a spotlight on the battle for high-value premium content production, as the company does its best to maximize the value of its multiple film-studio acquisitions over the past decade. Meanwhile, Disney-branded consumer products and interactive games show the extent to which companies can take advantage of their brand power to cross-sell products based on other aspects of their business.

If Disney gives good news on all of those fronts, the positive impact could go well beyond its own stock, establishing a host of winners and losers based on prevailing trends. Given the right conditions, Disney could inspire investors to send the Dow much higher tomorrow. But any signs of sluggishness could also confirm fears that investors already have about a possible economic slowdown, hurting much more than just Disney's share price.

What's ahead for content?Disney has so much leverage over cable operators that some believe that cable's days are numbered. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names.